EVE Online's economist speaks -- economics as an experimental science

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This week's BusinessWeek Innovation of the Week podcast talks with Eyjolfur Guomundsson, the house economist for EVE Online, a massively multiplayer space game based on establishing and disrupting interplanetary trade. What's fascinating here is getting the perspective of an economist whose job is to design an economy that's "fun" -- or at least engrossing. It's not often that you get to hear economics described as an experimental science.
An Economist on the Virtual Economy

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His last name, patronym, is GuÃ°mundsson (son of GuÃ°mundur). Of two lesser evils, please choose -d- as a substitute instead of -o-. Gudmundsson comes closer than Guomundsson which is a ballpark away!

As for the home of EVE Online, Iceland, we could use some fun economics, we are now being looked at by the world like the canary in the coalmine as our currency has fallen 50% (a sterling pound was 100 kr not so long ago, now its 200 kr), one of the biggest bank has been nationalised and more trouble ahead.

Hmmm … interesting. Note to self: must start reading the economic reports. (Well, admittedly I get most of my ISK from PvE loot, rather than production/mining/trade, so the market affects me somewhat less than others.)

Eve is interesting, in that the game world allows the total and irrevocable destruction of property, yet piracy and war are not just allowed but condoned as part of the fun of the game. This leads to fairly shady moral situations when people start paying real money for in-game currency:

Say you’re flying a Navy Megathron, which cost around a billion (10^9) ISK, which you paid for with ISK you bought from Chinese (or American!) ISK farmers, at say $35 for that billion. You accidentally run into a horde of PC pirates (now, most experienced players would have scouts running ahead for such an expensive ship, but say you’re naive) and lose the ship.

It’s not hard to see the parallel between this and having your wallet stolen with $35 in it…

Of course, CCP (who run Eve) have banned ISK selling in the EULA, most likely for this very reason, but that doesn’t stop it happening.

As a former EVE player I’ll have to correct you there Kieran. PVE loot can be (or used to be) a source of some exquisite items you could sell for millions. Apart from the Dread Gurista, True Sansha etc stuff ,you had Balmer Series Targeting Disruptors (then the best in game), Large ‘Solace’ Remote Repairers (worth millions each) etc.

These prices are the market prices you could get for them, I bought up the stock of Balmer in 2 regions back in the days (couple years ago) to be able to outfit my corporation with them.

#3: Fair enough. I got quite a fright when I was looking at fitting out my first battleship for a RR gang, and saw the price of the Large ‘Solace’ Remote Repairers. They were 6-7 mil, while the next step down, the ‘Arup’ were only 1-2 mil, for fractionally less ability.

I went with the Arup.

It amuses me that the best modules with low skill requirements often end up more expensive than the T2 equivalents, simply because people will pay more to get access to them earlier.

Another amusement is people selling skill books at trading hubs for 150% or more markup, for people too lazy to make the 2-3 jumps to the NPC seller.

And then there’s suicide ganking: Where it’s worthwhile losing an entire fleet of battleships to the Concorde police to destroy a freighter and loot its (extremely valuable) cargo. CCP made some serious upgrades to Concorde in the latest patch to deter this.

To delve into the EVE economics a bit, there is another reason for the popularity of named T1 equipment. Fitting requirements. Often the T2 equivilant is only fractionally better (1km longer range, 5 more points repaired) but at a considerable fitting cost (extra 10 cpu, extra 50 grid to pull random numbers up).

So if you can afford it, it pays off to equip a more expensive T1 items because it means you don’t have to drop one Megapulse II with a lesser version, which means you can’t use Scorch or whatever.

So its a compromise between cost and fitting.

(My days of flying in fleets and equipping ships are far behind now, no such things in LOTRO!)

EVE is a superb market playground, decent small encounter PVP experience and a lag-fest of giant proportions for large PVP. For PVE it’s rather simple but with the added paranoia inducing possibility of someone ganking you when ever, where ever (unless docked inside a space station).

It’s also easy to make it your 2nd job as a time investment.

If you want to game casually, there are other games out there much better suited to it.

If you want to try out how you do on a free market with little real life money cost ($15 per month) but a decent amount of time cost, there is no other game out there with a market that is even a fraction of EVE’s market.

I mostly only played EVE in beta. Was poor at the time so I think I only paid for a month or two. It was a really fun game, though. I often consider going back. But it seems like one of those games where newer players are at an extreme disadvantage. At least it was early on. Is that still the case?

Oh, and Cory, you may not hear economics described as experimental very often, but it really is. Most of the laws of economics really only work in a controlled closed system. Once you throw politicians and other irrational factors into the equation, it becomes purely experimental. For example: “Let’s see what happens when we encourage fairly stable lending organizations to loan money to people that they’d normally consider high-risk.”